My friend, former colleague, and analyst-corps veteran Charles Laughlin used to joke about feature one-upsmanship by likening it to the Something About Mary scene where a wantrepreneur comes up with the idea for “7-Minute Abs.” This classic scene was brought to mind this week by Amazon.
The company has launched a 30-minute-or-less promise for last-mile delivery. The program applies to specific items and locales at launch, and represents the latest in a long line of competitive attempts to shave seconds off the clock in local delivery. This is often a losing proposition (more on that in a bit).
As for the program’s specs, Amazon’s so-called “ultra-fast” delivery option will start in Seattle and Philadelphia. Products at launch include milk, eggs, fresh produce, toothpaste, cosmetics, pet treats, diapers, paper products, electronics, seasonal items, over-the-counter medicines, chips, and dips.
Prime members can choose this option for $3.99 per order, while non-Prime members will pay $13.99. In either tier, orders that fall below $15 include a flat fee of $1.99, which could push basket sizes up. Where applicable, the option can be found under the “30-Minute Delivery” banner on Amazon’s navigation bar.
Good Luck in L.A.
To pull this off, Amazon has created a more hyperlocal version of its classic hub & spoke fulfillment-center logistics. This involves smaller facilities that are designed for fast & efficient order fulfillment. These logistics define the product categories above in terms of size/value ratio (think: cosmetics).
It’s also worth noting that this move closely follows Amazon’s 15-minute delivery service in the UAE. It was able to operate under this cap, delivering some items in as few as six minutes. This tells us that the time commitment will vary by city, given variables like distance and density (good luck in L.A.).
Historically speaking, this move also follows the 2014 launch of Prime Now, which offered one-hour deliveries. That program was sunset in 2021, leaving us to wonder why it not only brought quick deliveries back, but cut its time window in half. As with all things Amazon, it’s all about Logistics.
For example, one explanation is that this program is meant to stress test some of the broader logistical systems that Amazon is investing in. This traces back to its June announcement to invest more than $4 billion to triple the size of its delivery network by next year. That expansion could involve local granularity.
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29-Minute Deliveries
That brings us to the question of why. As noted, this is a losing proposition as far as the unit economics go. Local delivery is one of those segments that always seems to be perpetually in a low-margin race-to-the-bottom arms race. But if anyone can get down in the mud to low-margin wrestle, it’s Amazon.
In that sense, this could be a loss leader play for customer acquisition. As noted, it can also stress test the broader delivery network. But more importantly, it can gain economies of scale with local deliveries of sundries & such, while pushing bigger-ticket items out of the same centers and combining orders.
As for local competitors like DoorDash and Instacart, they don’t have the scale to compete with Amazon by shaving more seconds off the clock (with the possible exception of Uber). But in the tradition of race-to-the-bottom oneupsmanship, don’t be surprised if someone starts offering 29-minute deliveries.
Header image credit: Agê Barros on Unsplash
